The third piece of the organizational alignment puzzle is how the reward system supports it or not. Rewards, whether compensation or recognition, have a powerful influence on people’s behaviors and can upend alignment fairly easily. For the purposes of finding opportunities to improve “alignment” we will focus on how rewards systems and change programs can conflict with each other.
One of the basic problems is that reward systems tend to be fairly static and so they don’t always match the intentions of a change program. Organizations are reluctant to tamper too much with them (due to the turmoil it tends to cause employees) so change programs often get introduced without any associated change to the reward system. This can be problematic because most change problems require actual changes in people’s behaviors, at all organizational levels, so understanding what drives people’s behaviors and what consequences reinforce those behaviors is critical. Reward systems are usually designed to influence people’s behaviors so you need to be sure the desired behaviors align.
We’ve worked with many organizations that introduced various creative modifications to the reward system to try to support the change program. As simplistic as it sounds, the ones that worked best were the ones where people got more money and it was meaningful to them. Modifications seem to work when you present a significant upside, but they don’t seem to work when there is a corresponding downside.
The area we most frequently see disconnects between alignment and rewards systems revolves around budgeting. When management compensation is linked to budget attainment there is a natural inclination to limit or manage improvement growth. This only makes sense since organizations tend to demand improvement every year so increasing performance too much in any one year is not only tough to achieve but also ensures that subsequent years will be difficult as well. Here the system tends to reinforce incremental rather than significant change.
